Mining firms hope for Zimbabwe gold rush

10 Apr, 2008

The world's resource companies are lining up to rebuild Zimbabwe's once mighty gold mines and metal refineries if President Robert Mugabe's government falls. "It is often painted as a treasure trove for miners, and with solid reason," said Anne Fruehauf, southern and east Africa analyst at consultancy Control Risks.
The southern African country, once a big producer of minerals, is hardly undiscovered ground for the world's miners. Rio Tinto digs for diamonds there, while the country's platinum reserves, among the largest on the planet, have attracted firms including world numbers one and two Anglo Platinum and Impala Platinum. The company that became BHP Billiton was active in the precious metal until the end of the 1990s, while Zimbabwean rock also contains chromite, coal, cobalt, copper, iron ore, nickel, palladium and tin - a rich spectrum of mineral wealth.
By far the main event in Zimbabwean mining is gold, and with prices on world markets close to all-time highs, miners are keen to start digging again. "At its peak, Zimbabwe produced about 25 tonnes a year of gold. Output is currently below 7 tonnes but it could easily treble that," said Magnus Ericsson, senior partner at Stockholm-based mining researchers Raw Materials Group.
Using today's prices, 25 tonnes of gold would be worth just under $750 million - no small prize for miners willing to take a risk on the country. "Not all the problems in Zimbabwe are just political. The majority of mines were small scale, run in an industrial way by entrepreneurs," Ericsson said.
First movers are likely to be small and medium-sized companies rather than multinational giants, which generally require huge deposits to justify investment. "The likelihood of finding an elephant in Zimbabwe is not that high because of the geology there," Ericsson added.
RULE OF LAW: After establishing there is metal to be drawn from the ground, the biggest concern for commercial miners is the legal framework which governs where and for what they can dig, how they sell it, and how much revenue the government will claim.
"Potential investors would want to see a good mining law, with security of tenure and a right to export metal," said George Rogers, head of commodities and resource finance at Investec. "They would also want a stable tax environment." Under Mugabe, stability has been a rare commodity. "If countries like the DRC can attract investors, so can Zimbabwe," Investec's Rogers said.

Read Comments